Get exclusive money‑saving offers and guides

How your credit score impacts your ability to get a home loan

Rates and fees last updated on 14 September 2017

What your credit score means for your dreams of homeownership.

In 2014, the way Australians’ creditworthiness was measured changed significantly. Changes to the Privacy Act introduced Comprehensive Credit Reporting, or positive credit reporting. This meant that lenders now had new information with which to assess borrowers. It also introduced credit scoring to Australia.

Credit scoring provides a measure of your risk of future default based on your credit history. Your credit score, or Equifax Score, is a number out of 1200 that lets lenders know how much of a risk you are.

What credit score do I need to get a home loan?

Unfortunately, this question is difficult to answer. Lenders in Australia don’t make their credit criteria public. Moreover, most lenders don’t rely solely on your Equifax Score to determine whether or not you’re at risk of default. Instead, they use their own internal credit assessments along with your Equifax Score.

While it’s tough to definitively state what the cut-off point is for a home loan, Equifax Scores do have benchmarks that can be useful in getting an idea of how likely you are to be approved for a home loan.

Excellent: A score between 833-1200 is considered Excellent. This means you are at extremely low risk of defaulting in the next 12 months. If your score is in this range, you’re unlikely to run into any trouble getting a home loan.

Very Good: A score from 726-832 is considered Very Good and puts you in the top 40% of the Australian population in terms of your creditworthiness. Most lenders would look very favourably on you.

Good: A score from 622-725 is classified as Good. This still puts you in good standing and the likelihood of an adverse event occurring on your credit file in the next 12 months is considered below average.

Average: A score from 510-621 puts you in the bottom 21-40% of the active population. This means you’re likely to suffer an adverse event on your credit file in the next 12 months. Keep in mind, though, that lenders will still take into account their own assessments, as well as your income and liabilities.

Below Average to Average: Any score below 509 puts you in the Below Average to Average category. Lenders consider the likelihood of an adverse credit event high. You may have trouble obtaining finance from traditional lenders.

Credit scores for bad credit borrowers

A VedaScore of Below Average to Average isn’t necessarily a death sentence for your dreams of homeownership. There are lenders who specialise in offering home loans to borrowers with bad credit. They’ll take a more hands-on approach in assessing your credit history, taking into account extenuating circumstances. You’ll end up paying more in interest, but you’ll also have the opportunity to begin rebuilding your credit history.

How is my credit score calculated?

Number of credit enquiries. Applying for a lot of credit cards or loans can adversely affect your credit score.

Defaults. If you’ve defaulted on a debt, this will impact your credit score.

Type of credit applied for. Your VedaScore will be different depending on the type of credit and the size of the loan you’re after. Mortgages are calculated using a different risk profile than something like a personal loan.

Payment history. This is where the “positive” in positive credit reporting comes in. Your credit file will also reflect your on-time payments, which can help balance out some negative marks.

How do I find out my credit score?

You can access your Equifax Score free through finder.com.au. You’ll get a copy of your score, along with an explanation to help you sort out the ramifications of your credit history. You can also get tips on how to improve your credit score.

Remember, a low Equifax Score may limit your options, but it doesn’t necessarily close the door on your homeownership ambitions. Even with a less-than-perfect credit history, there may still be home loan options available to you.

We value your feedback

Compare up to 4 providers

Related Posts

Do you know what your credit score is, or what it means? Find out everything you need to know about your credit score, how it's calculated, where you can access it and how you can check your credit score.

Your credit score is an important factor that helps lenders determine whether or not to approve your application. Find out what goes into your credit score and how you can improve it in this comprehensive guide.

Your credit file and your data are an important part of your finances, and Equifax is one of the companies holding the key to that data. Find out all about Equifax, who they are and what kind of products it offers.

By checking your credit file, you can determine whether you have “bad credit”, understand why your score is low and work out what future actions you can take to improve it. Read this guide to find out what you need to know.

Ask an Expert

Do not enter personal information (eg. surname, phone number, bank
details) as your question will be made public

finder.com.au is a financial comparison and information service, not a bank or
product provider

We cannot provide you with personal advice or recommendations

Your answer might already be waiting – check previous questions
below to see if yours has already been asked

Your Question

Subscribe to the Finder newsletter for the latest money tips and tricks

Notify me via email when there is a reply

Finder only provides general advice and factual information, so consider your own circumstances, read the PDS or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms and Conditions and Privacy Policy.

Disclaimer -
Hive Empire Pty Ltd (trading as finder.com.au, ABN: 18 118 785 121) provides factual information, general advice and services on financial products as a Corporate Authorised Representative (432664) of Advice Evolution Pty Ltd AFSL 342880. Please refer to our FSG - Financial Products. We also provide general advice on credit products under our own Credit Licence ACL 385509. Please refer to our Credit Guide for more information. We can also provide you with general advice and factual information on about a range of other products, services and providers. We are also a Corporate Authorised Representative of Countrywide Tolstrup Financial Services Group Pty Ltd. ABN 51 586 953 292 AFSL 244436 for the provision of general insurance products. Please refer to our FSG - General Insurance. We hope that the information and general advice we can provide will help you make a more informed decision. We are not owned by any Bank or Insurer and we are not a product issuer or a credit provider. Although we cover a wide range of products, providers and services we don't cover every product, provider or service available in the market so there may be other options available to you. We also don't recommend specific products, services or providers. If you decide to apply for a product or service through our website you will be dealing directly with the provider of that product or service and not with us.
We endeavour to ensure that the information on this site is current and accurate but you should confirm any information with the product or service provider and read the information they can provide. If you are unsure you should get independent advice before you apply for any product or commit to any plan. (c) 2017.

Important information about this website

finder.com.au is one of Australia's leading comparison websites. We compare from a wide set of major banks, insurers and product issuers.

finder.com.au has access to track details from the product issuers listed on our sites. Although we provide information on the products offered by a wide range of issuers, we don't cover every available product. You should consider whether the products featured on our site are appropriate for your needs and seek independent advice if you have any questions.

The identification of a group of products, as 'Top' or 'Best' is a reflection of user preferences based on current website data. On a regular basis, analytics drive the creation of a list of popular products. Where these products are grouped, they appear in no particular order.

Where our site links to particular products or displays 'Go to site' buttons, we may receive a commission, referral fee or payment.

We try to take an open and transparent approach and provide a broad based comparison service. However, you should be aware that while we are an independently owned service, our comparison service does not include all providers or all products available in the market.

Some product issuers may provide products or offer services through multiple brands, associated companies or different labelling arrangements. This can make it difficult for consumers to compare alternatives or identify the companies behind the products. However, we aim to provide information to enable consumers to understand these issues.

Providing or obtaining an estimated insurance quote through us does not guarantee you can get the insurance. Acceptance by insurance companies is based on things like occupation, health and lifestyle. By providing you with the ability to apply for a credit card or loan we are not guaranteeing that your application will be approved. Your application for credit products is subject to the Provider's terms and conditions as well as their application and lending criteria.

Please read our website terms of use for more information about our services and our approach to privacy.